If you’re ready to apply for a business credit card but you’re not quite sure where to start, you’ve come to the right place. We’ll walk you through everything you need to know to get a business credit card in 2023.
What is a business credit card?
A business credit card is similar to a personal credit card, with the main difference being that it’s only used for business expenses. A business credit card provides business owners with a line of credit as well as a number of other features designed to help you grow your business. In addition to keeping your business and personal finances separate, with a business credit card you can also earn membership rewards on eligible purchases, and access other perks like saving money on gas prices.
How do business credit cards work?
Business credit cards work pretty much the same as personal credit cards: you charge expenses on your card, and then you have to pay off those charges according to your billing cycle. You’ll receive a monthly credit card statement which lists both the total balance owed and the minimum amount due, along with the date that your payment is due. You can choose to pay the minimum amount due, the total balance owed, or anything in between, but if you pay off less than the total balance owed, you’ll start accruing interest on the balance left over in the account. Each business credit card has a different annual interest rate, which is an important detail to consider when choosing the right business credit card for you.
Who can get a business credit card?
If you have a business in Canada, you can get a business credit card. Whether you’re an unregistered sole proprietorship or a corporation, any business structure can apply for a business credit card, as long as you’re in compliance with both federal and provincial/territorial requirements.
Benefits of getting a business credit card
While business credit cards function in the same way as a personal credit card, they also tend to come with a number of benefits that set them apart and make them a worthwhile investment.
Higher credit limits
Business credit cards usually have significantly higher credit limits than personal credit cards, since business owners may need access to higher amounts of capital for a variety of reasons. For example, a business credit card can help you make large purchases like bulk product orders or new equipment so that you can grow your business even faster, even if you don’t have those funds on hand. If you manage to establish and maintain good business credit history, it will also be easier to access increased credit limits so your business can continue to grow.
Separate business and personal finances
The last thing anyone wants during tax season is to spend hours going through your expenses line by line to determine what’s business and what’s personal. Having a credit card that’s exclusively used for business expenses makes it much easier to track your finances and simplify your tax filing process.
Fast and easy access to working capital
Depending on your business, your cash flow might be unpredictable or seasonal. However, just because you’ve had a slow business month doesn’t mean you’re not still on the hook for your fixed expenses like rent, utilities, and payroll. A business credit card gives you access to funds you otherwise wouldn’t have to help ensure you’re never scrambling to get your bills paid on time. Plus, you’re protected if an emergency expense comes up unexpectedly.
Build business credit
Establishing your credit history as a business is important if you intend to seek financing at some point in the future. As you pay off your credit card balance on time, you’ll build up a good credit rating for your business, increasing your credibility in the eyes of potential investors, lenders, and those issuing business grants. A good business credit rating can also help you access lower interest rates, since you’ve proven your ability to pay off your credit on time.
Ability to earn rewards
Many business credit cards offer rewards that add up as you make eligible purchases. These rewards can be redeemed for things like travel points or cash back credits. The rewards you earn will depend on the business credit card you choose. For example, the RBC Avion Visa Infinite Business credit card provides 25,000 welcome points upon enrolment which can be redeemed in exchange for airline tickets, vacation packages, hotel stays, cruises, and tours. If travel isn’t your thing, those points can also be redeemed for the latest Apple products, technology from Best Buy, merchandise and gift cards, or to pay down your credit card balance.
How to get a business credit card
Let’s take a look and the steps you’ll want to take in order to secure a business credit card.
Establish business credit
If you’re a new business owner, your business won’t have any credit history for banks to use to determine your eligibility for a business credit card. That’s why it’s a good idea to start building your business credit history before you apply for a business credit card.
First, make sure that you’ve received your 9-digit Business Number (BN) from Canada Revenue Agency (CRA), which you’ll need for things like collecting and remitting GST/HST and accessing other CRA services.
Next, open a business chequing or savings bank account, depending on your needs as a business owner. Start using your business bank account for all business transactions, including all eligible business purchases.
Another way to build your business credit history is by applying for a business loan and making the payments on time.
Evaluate your eligibility
In general, any business is eligible to get a business credit card. You don’t even have to be registered or incorporated, if that’s not required by your province or territory to start a business. However, each bank and credit card will have specific qualifications you need to meet in order to have your application accepted. If your business doesn’t yet have a credit history, or even if it does, banks may look at your personal credit score as well to decide whether or not to grant you a credit card.
Some banks will examine your entire financial picture, going beyond your credit score to look at any major assets or commercial income you may have when determining which credit cards you’re eligible for.
Find the right business credit card
When choosing the right business credit card for your company, you’ll want to weigh all of the contributing factors, like annual fees, rewards, and introductory offers or signup bonuses. Banks will likely have a variety of business credit cards available, depending on the size of your business and what features you need. For example, RBC has business credit cards designed for businesses with an annual sales revenue under three million dollars, a commercial card program for supplying employees with a company credit card, and cards for large corporations that require more advanced card management.
Gather required information
Each business credit card application will require a different set of documents, but in general, you’ll probably be asked to provide your business name, registered address, annual business revenue, number of employees, registration or incorporation documents, projected revenue, and either your Business Number or your Social Insurance Number (SIN) if you’re applying as a sole proprietorship.
Banks may also require a personal guarantee, which means that you as an individual are personally responsible for any missed or late payments to your business credit cards. In other words, your business credit history will also impact your personal credit score.
Research your options
If you already have a business bank account, or even just a personal bank account, you may as well start by looking at your current bank’s business credit card options to see if they have something that fits your needs. However, it’s always a good idea to shop around and compare the different options available. Consider things like credit limits, annual fees, interest rates, rewards, welcome bonuses, and foreign transaction fees when making your decision on which card to apply for.
Make sure you’ve carefully read the terms and conditions of the business credit card before you submit your application.
Complete your business credit card application
Now that you’ve gathered all the necessary documents and information, it’s time to submit your application. Depending on the bank you choose, you may be able to apply for a business credit card online, or you may be required to phone in or speak to a representative in person. At RBC, businesses with less than 10 employees can visit any nearby branch to apply for a business credit card, while those with more than 10 employees will need to contact a business specialist.
Wait for approval
Once your application has been submitted, it’s all in the hands of the bank. They’ll receive your application and check your business and personal credit. If they determine that you are creditworthy, your credit card should be approved and you’ll receive your new card in the mail.
Activate your business credit card and use it responsibly
When you receive your business credit card, follow the attached instructions to activate it and you’ll be ready to start using it for eligible business purchases. Continue to pay off your balance in a timely manner to maintain good credit and gain access to preferred interest rates and higher credit limits.
Which card is best for my business?
The right credit card for your business depends on a number of factors, from the size of your company to the types of purchases you make and what type of rewards you’re looking for. When choosing which business credit card to apply for, consider your business spending habits and consider the credit card benefits, fees, and the likelihood that you’ll be approved.
Here are the business credit cards available at RBC, along with information on their annual fees and what’s included.
RBC Visa CreditLine for Small Business: This no-fee business credit card is perfect for small businesses. It has a $0 annual fee and provides easy access to an unsecured line of credit at a low interest rate, as well as RBC Rewards points.
RBC Business Cash Back Mastercard: Another option with a $0 annual fee, this card gives you 1% cash back on your purchases in place of rewards points, so you can easily reinvest those funds back into your business or use them to pay down your credit balance.
Visa Business Card: The next step up is the Visa Business Card, with a $12 annual fee. It’s a flexible, no-frills credit card option that you can use to pay business expenses and build your credit history.
RBC Visa Business Platinum Avion: For a $120 annual fee, you’ll get access to RBC’s premium rewards program, where you can earn points to redeem for travel benefits, merchandise, gift cards, or to pay off your credit balance. This credit card comes with premium insurance coverage, and it simplifies your accounting process with employee reimbursement and by identifying tax-deductible expenses.
RBC Avion Visa Infinite Business: This business credit card has a $175 annual fee, earning you points on all business purchases and providing access to industry-leading reporting tools, expense management tools, and employee card controls to help you make informed financial decisions for your business. You’ll earn rewards points faster with the premium rewards program, and you’ll have peace of mind while travelling due to the comprehensive insurance coverages included with this card.
Key takeaways
While a business credit card isn’t technically a requirement for business owners, there’s no doubt it can be a huge help when it comes to running (and growing) your company smoothly. Whether you’re looking for increased cash flow during slow seasons, you want to earn points on eligible business purchases, or you’re focused on building your business credit history, the right business credit card can help you achieve those goals.
How to get a business credit card FAQs
Can you use an EIN to get a credit card?
An Employer Identification Number (EIN) is the United States version of a Canadian Business Number (BN). Canadian businesses don’t use the EIN, so it won’t be a relevant document for your credit card application. However, depending on the business credit card you choose to apply for, a BN may be required, so look closely at the required documents when you’re completing your credit card application.
Who is eligible for a business credit card?
Technically, the only requirement to be eligible for a business credit card is that you have a business. Your business doesn’t even have to be registered or incorporated to be eligible, provided that’s not required by your province or territory. As long as your business has legitimate reasons to apply for a credit card, even unregistered sole proprietorships can qualify for certain business credit cards.
Can you get approved for a business credit card with no revenue?
If there is a reasonable belief that your business will generate revenue, you can get approved for a business card even if you currently have no revenue. Banks generally look at your entire financial picture, including your savings, assets, and personal credit history, when determining whether or not to approve you for a business credit card. In fact, there are even business credit cards available for those with a fair credit rating, although they may require a security deposit to be paid upfront before you can begin charging purchases to credit.
Now that you know everything there is to know about the benefits, requirements, and costs of a business credit card, you’re ready to submit your application for the card that’s right for you.
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.